Malt drinks, which look like cola but have a strong bready
character, have been popular in Colombia and Venezuela for ages,
but are catching on quickly in other Latin American markets,
even as consumer spending is crimped in some markets by economic
weakness.

SABMiller, the No. 2 brewer worldwide but No. 3 in Latin
America, is also exploring complementary products like shandies
and ciders, which are gaining popularity in the United States,
as it navigates an economy that is still growing, but less than
before.

"It's not that we're running off to other beverage
categories. The core of our growth opportunity is beer," said
Karl Lippert, president of SABMiller Latin America, in an
interview last week at his new Miami office. But malt, he said,
is "a lovely business".

"It's entirely complementary to the beer business because
you make the wort as if you're making beer and then you finish
off the product without the fermentation process," Lippert said
of the liquid extract made from ground malt and grain. "It's
quite a unique phenomenon."

Other brewers, including the region's No. 1 and No. 2
players, Anheuser-Busch InBev and Heineken,
respectively, also sell malt drinks, which are more easily made
by brewers than traditional soft drink makers since they are
made from the same liquid as beer, just bottled before
fermentation turns sugar to alcohol.

SAB's most established malt market is Colombia, where its
Pony Malta has been a staple for over 50 years. It is the
nation's second-largest soft drink, with market share of around
9 percent, Lippert said. SABMiller also sells Pony in Ecuador,
ActiMalta in Honduras and El Salvador, Malta Vigor in Panama and
Maltin Power in Peru.

The drinks are popular with mothers and children, since they
have various nutrients and are viewed as healthy. They are also
popular with construction workers who often use them as meal
replacements, he said.

Malt drinks account for about 3.4 million hectoliters, or
about 6 percent, of the volume SABMiller sells in Latin America,
Lipper said. He expects to reach 5 million hectoliters in the
next three years.

That implies growth of about 50 percent, which will far
outpace that of beer. In the six months ended September 30,
SABMiller's sales of lager in Latin American rose 4 percent.

The company also recently launched Maltizz in Colombia,
which has a light straw color and is meant to be lighter and
more refreshing than traditional malts. Lippert said Maltizz,
which tastes like a cross between a Pony Malta and a lemon-lime
soda, is so far performing well.

Malt is also very popular in Venezuela, where it is made by
Empresas Polar. Other brands made by rivals are sold in the
Dominican Republic, Costa Rica and Puerto Rico. They can also be
found in some U.S. cities including Miami and New York.

SABMiller also sells about 500,000 hectoliters of malt
drinks in Africa, where it introduced them in 2010.

COOKING AT HOME

Overall, London-based SABMiller is more focused on growing
organically, with its own development, rather than moving into
new markets through acquisitions.

"We think we have significant potential to grow in our
existing markets because consumption in our markets is
relatively low," said Lippert in a 34th-floor conference room
overlooking Biscayne Bay.

AB InBev controls more than half of the Latin American
market, helped by a big presence in Brazil. It also plans to buy
the half of Mexican brewer Grupo Modelo that it
does not already own. Heineken has nearly 16 percent of the
market, since buying the beer division of Mexico's Femsa
in 2010.

Brazil and Mexico together account for some two-thirds of
the Latin American beer market, Lippert said.

The remaining third is where SABMiller plays, deriving its
14 percent of the Latin American beer market through leading
positions in the smaller nations of Colombia, Peru, Ecuador,
Panama, Honduras and El Salvador.

Within soft drinks, Coca-Cola is the region's leader, with
nearly 36 percent of the market, according to Euromonitor
International. PepsiCo is second with 12 percent, while France's
Danone is third with 11 percent.

Some beer markets not already dominated by another
international player are Belize, Costa Rica, Guatemala,
Nicaragua and Venezuela, Lippert said. He did not rule out
acquisitions by SABMiller but said some of those markets were
either too small or too volatile.

"Business is not just about buying things," Lippert said.
"You also have to cook at home."

(Adds Permian rig additions)
Dec 9 U.S. energy companies this week added the
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Drillers added 21 oil rigs in the week to Dec. 9, bringing
the total count up to 498, the most since January, but still
below the 524 rigs seen a year ago, energy services firm Baker
Hughes Inc said on Friday.
Since crude prices briefly recovered from

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